Ridgefield Town Budgets – Historical Context

By Mike Rettger and Andrew Okrongly, members of Ridgefield Board of Finance

In the coming weeks, town voters have the opportunity to participate in an important part of local governance, the annual budget process.  This is a months-long process that starts with the Board of Selectmen and the Board of Education each developing their respective budget proposals, which then come to the Board of Finance for review in late March.  Residents can voice their opinions on the proposed budgets at the BOF public hearing on Monday, March 28th, and can observe the BOF budget discussions the rest of that week (see BOF meeting schedule here).  The final proposed budget is then voted on at the annual town meeting on Monday, May 2nd, and in the annual budget referendum, occurring this year on Tuesday, May 10th.

The budget discussions focus on town revenues and planned spending primarily for the coming fiscal year.  To help prepare ourselves for the budget meetings this year, we thought it could also be informative to step back and take a longer-term look at the history of budget and related data for the past ten years.  This was fairly easy to do, as the town’s annual financial report includes a number of 10-year exhibits displaying this information.

We noted some interesting trends when the budget data are reviewed from this longer time perspective. Overall, the data paint a picture of a town that has done a very good job managing its budget and finances over this period, as highlighted particularly by three sets of indicators.

Overall Budget Growth vs Economic Impact

Cumulatively over the ten-year period, property taxes (as measured by total taxes levied) have grown at roughly the same pace as inflation.  

Aggregate personal income is a measure of the collective income for the town’s residents, as published by the US. Census Bureau. This measure was flat to declining at the start of the ten-year period (due to the continued effect of the 2008-2009 recession) but recovered its positive growth in recent years.  

The growth in taxes has been less than income growth for the past five years.  The result is that the total tax levy, as a percentage of personal income, saw a rise, peaked about six years ago, but then has shown a steady decline over the past five budget years.

A Steady Decline in Total Town Borrowing

One element of the budget process is the development of an annual capital budget.  This budget covers outlays for larger budget items, such as equipment and building projects, which have a higher cost and generally an expected useful life of over ten years.  The capital budget is also part of the annual budget package and is voted on as distinct proposals in the budget referendum.

In 2001, the town approved the “Bundle”, a $90 million borrowing package for upgrades to our schools and for the construction of the Rec Center.  The town has been repaying  the bonds used to fund these projects over the twenty years since they were first issued, with the interest and principal repayments being an element of the annual operating budget.

Since 2001, the town has made an active effort to control its need for additional borrowing.  Over the past ten years, annual capital budgets have averaged about 3% when compared with the corresponding operating budgets.  The result is that the town has seen a steady reduction in the amount of total authorized borrowing.  The one exception during this period was the bonding for the wastewater treatment plant update project, which added $8 million of authorized borrowing five years ago.

This paydown in total borrowing has had two important benefits.  First, there has been a significant reduction in the cost of debt service in the annual budget over the past ten years.  As important for the future, this result leaves the town well positioned financially for its consideration of a new police and fire department headquarters facility in the next several years.

A Strong and Consistent “Rainy Day” Fund

As part of its fiscal management practices, the town maintains a “Rainy Day Fund” – a reserve fund that is intended to protect against extraordinary budget fluctuations due to adverse economic conditions.  This reserve was used, for example, in the 2020-2021 budget when there was significant uncertainty and concern about the possible economic effects of the Covid situation on the town and its residents.  Use of its Rainy Day reserve allowed the town to maintain a flat mill rate without needing to make drastic cuts in spending for town services and schools.

The BOF has an established policy of maintaining the Rainy Day Fund at a level roughly equal to 8%-9% of the town’s operating budget for the coming fiscal year.  The BOF also has an informal goal in setting the budget, that town budget surpluses in excess of what is needed to maintain the reserve fund should be assigned to the following year’s budget as a revenue source, thereby reducing the amount of actual tax levy required in calculating the mill rate. 

As shown above, the town has been successful in achieving these two objectives.  Over the past ten years, the Rainy Day Fund has been maintained at the target level, even while significant portions of the annual surpluses have been “recycled” back into the following year’s tax calculation.  (As a historical note, the large budget surplus shown for 2011-12 was the result of a large repayment to the town of utility charges following an audit.  Excluding that one-time item, the cumulative amount of surplus contribution to the annual budgets approximately equals the total of annual budget surpluses for this period).

We hope this information is useful education for you.  We encourage everyone to actively engage in the upcoming budget dialog and to come out to voice your opinion, through the ballot, at the annual budget referendum on Tuesday, May 10th.

Mike Rettger, CFA-Retired and Andrew Okrongly, CFA are Democratic members of the Board of Finance.  The opinions expressed here are solely those of Mike and Andrew, and are not intended to represent those of the other members of the BOF.